Outfront Media (OUT) Q2 FFO, Revenues Beat Estimates – August 4, 2017

Outfront Media Inc. (OUT – Free Report) reported second-quarter 2017 adjusted funds from operations (“FFO”) per share of 56 cents, beating the Zacks Consensus Estimate by a penny. The figure, however, came in lower than the year-ago quarter tally of 63 cents.

Results reflected an increase in income taxes and maintenance capital expenditures.

Revenues for the quarter came in at $396.2 million, comfortably surpassing the Zacks Consensus Estimate of $388.38 million. Further, revenues rose 2.8% from the year-ago tally of $385.3 million.

OUTFRONT Media Inc. Price, Consensus and EPS Surprise

Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.

Quarter in Detail

Billboard revenues of $274.2 million in the quarter indicated a marginal increase of 0.2% year over year. Results reflect increased proceeds from condemnations and the conversion of static billboards to digital. However, the positives were partly offset by the effect of lost and new billboards in the quarter. The reduction in national advertising in the U.S. caused a small decline in average revenue per display.

Transit and other revenues of $122 million also increased 9.2% from the prior-year quarter. This was due to the net effect of won and lost franchises partly offset by a reduction in revenues from the U.S. national advertisements.

Operating expenses of $213.3 million increased 5.8% year over year, mainly due to elevated transit franchise.

Operating income during the reported quarter was $65 million, up 10.2% from the year-earlier quarter. Adjusted operating income before depreciation and amortization declined 0.8% year over year to $122 million.

Net cash flow resulting from operating activities for the six-month period ending Jun 30, 2017, came in at $79.1 million, significantly down from $104.7 million recorded in the comparable period last year.

As of Jun 30, 2017, Outfront Media’s liquidity position comprised cash of $23.1 million, as well as $343.5 million of availability under its $430.0 million revolving credit facility, net of $1.5 million of issued letters of credit against the revolving credit facility.

Our Take

Outfront Media’s diversity, both geographical and industry wise, efforts to convert from traditional static billboard displays to digital billboard displays and low cost of advertisement across the OOH platform bode well for growth. Moreover, the company operates in an industry characterized by high barriers to entry due to permitting restrictions. In fact, permits are the most prized assets of the company. As a result, Outfront Media has solid chances of growth by capitalizing on industry fundamentals.

However, a challenging national advertising market, cut-throat competition and any rise in interest rates remain concerns.

In addition, the stock has declined 11.7% year to date, underperforming the 4.1% gain of the industry it belongs to.

Q2 Earnings Schedule of Other REITs

We now look forward to the earnings releases of other companies in the REITs sector like Care Capital Properties, Inc. (CCP – Free Report) , Condor Hospitality Trust Inc. (CDOR – Free Report) and Community Healthcare Trust Inc. (CHCT – Free Report) , all of which are slated to report Q2 numbers in the coming week.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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